On appeal from Superior Court of New Jersey, Law Division, Camden County, L-6434-00.
Before Judges Carchman, Wecker and Weissbard*fn1.
The opinion of the court was delivered by: Weissbard, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Defendant, Avis Rent A Car Systems, Inc. (Avis) appeals from a judgment requiring it to provide primary insurance coverage to defendant, Richard Brown, Jr., and, as a result, to reimburse Brown's personal auto insurance carrier, Farmers Insurance Company (Farmers) for legal fees and settlement monies that it paid on Brown's behalf. We conclude that as a self- insurer, Avis is required to provide primary coverage despite a provision in its rental contract with Brown that made its coverage secondary to that of Farmers.
This appeal arises out of a multiple vehicle accident on April 12, 1999. A car being operated by Dominick N. Coia, Jr., and owned by James O'Connell, was traveling west on the Atlantic City Expressway when Coia, having missed his intended exit, attempted to execute a u-turn from the left lane through a cut- thru on the Expressway. As Coia slowed to make his illegal turn, his vehicle was struck from behind by a car owned by Avis and operated by Brown. Patricia Robinson was a passenger in Brown's car. Two other cars following behind Brown then became involved in the collision. The details of their ownership and operation are not pertinent to the issues that confront us.
Robinson thereafter initiated suit against Coia, Brown and Avis. The law firm of Sachs, Maitlin, Fleming, Green, Wilson and Marotte (Sachs) filed an answer on behalf of Brown on assignment from Farmers, Brown's personal automobile insurance carrier. A separate law firm filed an answer on behalf of Avis. Thereafter, Brown filed a cross-claim against Avis seeking a declaration that Avis, as a self-insured, was required to provide primary coverage to Brown, to assume his defense and reimburse him for counsel fees already incurred. Avis and Brown filed summary judgment motions on the cross-claim, with Avis contending that its insurance was only secondary to that of Farmers and that, accordingly, no defense of Brown was required.
The Avis car had been rented by Brown's wife at an Avis facility in New Jersey. However, the car was registered in Pennsylvania where Avis is self-insured.*fn2 Brown declined Avis' offer of optional insurance. The rental agreement between Avis and Brown contained the following provision:
[A]nyone driving the car as permitted by this agreement will be protected against liability for causing bodily injury or death to others or damaging the property of someone other than the driver and/or the renter up to the minimum financial responsibility limits required by applicable law.....
The coverage provided by you [Avis] shall be excess over any applicable insurance available to me [renter] or any other driver, from any other source, whether primary, excess, secondary or contingent in anyway.
As noted, Brown had a personal automobile policy with Farmers that contained liability coverage limits of $100,000 per occurrence and $300,000 per accident. That policy had an excess insurance clause governing Brown's use of a rental car, that provided that"any insurance we provide for a vehicle you do not own shall be excess over any other collectible insurance."
In ruling upon the cross motions for summary judgment, Judge Donaldson determined that Avis' self-insurance certificate was the equivalent of an insurance policy, with the result that Avis became the primary insurer, with Farmers providing excess coverage only. Central to that ruling was the judge's conclusion that the rental agreement between Brown and Avis was not part of Avis' self-insurance and the terms of that agreement did not apply to render the Avis coverage excess. Subsequently, the judge ruled that the extent of Avis' liability under its certificate was $15,000/$30,000, the minimum required under New Jersey law, rejecting Brown's argument that the coverage was limited only by the extent of Avis' assets. Avis was also required to assume the defense of Brown in the pending action.
Upon the substitution of new counsel for Brown, the Sachs law firm filed an application for reimbursement from Avis of its attorneys' fees and costs in both the cross-claim coverage action and in defense of the underlying personal injury suit. The judge awarded the firm $9585 as reimbursement for defense of the Robinson case and $16,300 for its work on the coverage aspect of the litigation, together with $496.96 in costs.
Subsequently, the underlying personal injury case was concluded, and this appeal by Avis followed.*fn3 Avis contends here, as it did below, that its coverage is only excess to that of Brown's personal insurer, Farmers, and that it should be reimbursed for all fees and costs paid to Sachs as well as being reimbursed for the work of its attorneys and for settlement money paid on Brown's behalf. Avis argues that by virtue of the quoted provision in its rental agreement with Brown, the coverage provided by its self-insurance certificate was only secondary to that of Brown's personal auto insurance carrier. We disagree.
Pursuant to N.J.S.A. 45:21-2, Avis, being in the business of leasing motor vehicles, is required to carry liability insurance insuring it against damages suffered by a third party resulting from the negligent operation of its leased vehicle. The limits of liability must be in the minimum amount of $15,000/$30,000/$5000. Hanco v. Sisoukraj, 364 N.J. Super. 41, 45 n.1 (App. Div. 2003). The statute further provides that the lessor may be self-insured, as Avis is here. N.J.S.A. 45:21-8. However, as Avis correctly observes, the statute does not explicitly state that the required coverage must always be primary (as opposed to co-primary or excess) but only that there be such coverage. See Cosmopolitan Mut. Ins. Co. v. Continental Cas. Co., 28 N.J. 554, 563 (1959).
Resolution of this appeal requires us to balance two ostensibly competing lines of authority. On the one hand, Avis stresses the settled principle that agreements not contrary to law, and without ambiguity, should be enforced as written, and not be re-written by the courts. See Christafano v. New Jersey Mfr. Ins., 361 N.J. Super. 228, 234-35 (App. Div. 2003); Universal Underwriters v. CNA Ins. Co., 308 N.J. Super. 415, 420 (App. Div. 1998). In that regard, Avis is correct in noting that the language contained in its rental agreement with Brown is"plain and unambiguous." Nevertheless, this general rule has an important caveat; that insurance policies, as well as rental agreements, are contracts of adhesion and subject to special rules of interpretation. Christafano, supra, 361 N.J. Super. at 235. Such contracts"will not be enforced to the extent that they conflict with the public policy of this state." Allstate Ins. Co. v. Royal Globe Ins. Co., 195 N.J. Super. 598, 604 (App. Div. 1984)(citations omitted). Since it complied with the statute, Avis argues that it violated no public policy. Brown contends that Avis' attempt to avoid providing primary insurance coverage to him by means of the provision in the lease agreement constitutes just such a violation of public policy.
We conclude that Judge Donaldson correctly resolved the competing arguments against Avis. In our view, Avis' effort to avoid providing insurance coverage through the terms of its rental agreement does violate public policy. First, Avis gains a substantial monetary benefit by being self-insured and cannot rightly be permitted to"have its cake and eat it too." Under its rental contract, Avis escapes any responsibility for providing insurance coverage if the renter has other liability insurance available to them. Thus, in what must be a significant percentage - if not the vast majority - of instances Avis is relieved of providing any coverage at all.*fn4 Avis thereby shifts the burden of providing the mandatory insurance coverage to the lessee's insurer. White v. Howard, 240 N.J. Super. 427, 430 n.1 (App. Div.), certif. denied, 122 N.J. 339 (1990). In White, Judge Dreier said:
While Agency [the rental company] may choose to save insurance premiums by self-insuring its vehicles, it should not be permitted to do so partially at the expense of other insurers who normally would look to each other under the"other insurance" provisions of their policies, and who have set their rates accordingly. Since only financially responsible owners of 25 or more vehicles may become certified self insureds... those best able to pay would be ...